Payday Loans Debt Consolidation

Top 7 Helpful Hints If You Are Considering Using Payday Loan Services

When there is an unexpected expense to meet, people often look toward payday loan services for an easy solution. It is true that payday cash advances are very easy to borrow, but it is also true at the same time that it is a highly expensive financing option. Most people borrow these short-term loans on temptation, but they often fail to repay the same on its set due date, which eventually pushes them into a much deeper debt problem. When payday debts remain unpaid for a couple of months, the borrowers trapped into a vicious cycle of debt, coming out of which is never an easy task. Therefore, if you are considering borrowing these loans, you are advised to go through these seven basic facts first.

3-Digit APR

Payday loan services are usually offered through very attractive packages, where lenders claim that their cash advance programs are easy and fast. Some of the attractive features of payday loans that are often advertised in big, bold letters include simple eligibility criteria, easy application process, no need to submit documents, paperless process, no faxing required, credit score doesn’t matter (even people with bad credit can qualify), fast approval and other such things. When you are looking out for a way to get instant cash so that you can meet your urgent financial needs and if someone is offering is quick money through a simple process, you are obviously very much likely to get tempted to sign up for that loan program. But, it is very important for you to keep in mind that lenders often do not disclose the high cost involved with these loans. All those states where payday lending is legal allow lenders to charge 3-digit APR (Annual Percentage Rate), which can range from 200% per annum to as high as 750% per annum (in some cases, even more). It means even if you borrow a payday cash advance for just two weeks, you must expect to pay back somewhere around $30 to $60 just in the form of interest.

Hefty Amount Of Additional Finance Charges

Another very important thing that you must know about payday loan services is that they charge hefty amount of other finance charges in addition to the amount of interest. For example, there can be processing fee, verification fee, fund transfer fee and other such things. When you add the cost of these additional charges with the amount of interest, you will be shocked to see that a $100 of loan can actually cost you anywhere around $150 to $180.

Very Short Repayment Period

Payday lenders require you to pay back the loans you borrow on the next pay day, which is the day when you get your monthly pay check deposited into your checking bank account. For example, if you receive your salary on 5th of every month and you are borrowing a cash advance on 20th April, 5th May will be the due date for you. As per the statistics and report, most borrowers fail to repay the loan on the set due date and thus they eventually are charged more, such as in terms of late penalty fee. Besides that, you are also charged interest on the same high rate for every single day of delay you make in repayment.

Risky Provision Of Rollovers

When you sign up for certain payday loan services and fail to make the repayment on the scheduled due date, lenders usually renew your loan, claiming that this is for your convenience, as they are providing you an extension of one additional month to pay off the debt. What they do not tell you is that you will be charged interest for this additional one month. Add to this collection fees and other penalty charges. Just one rollover can make your overall outstanding debt balance double (or even more) of the actual principal amount you borrow initially. Though rollovers are legally prohibited in some states, most states still allow this provision.

Unfair Collection Practices

Lenders offering payday loan services are also notorious for their unfair collection practices. Let me give you an example. In most cases, you are required to submit a post-dated check when you sign up for the loan. The lender send this check to your bank for collection on the set due date. If you do not have sufficient fund in your bank account, your check will obviously bounce, which will result in certain collection fees charged by both lenders as well as your bank. Most lenders are so unscrupulous that they keep on sending the same check, which has already been bounced, again and again for collection and they charge a hefty amount of collection fee every time the check bounces. And, every time the check bounces, even your bank charges you a penalty. This practice makes the situation more problematic for you.

No-Verification Loan Scams

You are also very much likely to come across many lenders that claim to offer no verification payday loan services. These lenders often offer their services either through Internet or through phone calls. They claim that they do not waste any time in verifying the details provided by you, and that as soon as you provide the details required, they will transfer the fund requested to your bank account. You are strongly recommended to be wary of such lenders, as they are usually scams and identity thieves. They will try various tricks to persuade you to provide private, confidential information about you, such as your social security number, your bank account details (including password) and credit card details. Never provide these crucial details to anyone no matter how lucrative offer they make.

Illegal Online Payday Loans

Last, but not the least, it is very important for you to keep in mind that sixteen states in the United States of America have strictly banned payday loan services. All these sixteen states have also imposed a low-rate cap on all types of loan, which is usually not more than 30% per annum. You can brose through the ‘payday loan laws’ section in the ‘payday loan’ category to access detailed information on the legal status of payday lending in different states in the US. The point here to note is that many online payday loan companies claim that since they do not have their offices located in your state, the payday loan laws of your state do not apply to them. It means they even offer cash advances to consumers residing in states where payday loan is banned. Always remember, whether it is an online payday lender or a local payday loan store, they must abide by the laws of your state if they are issuing a loan to you.

Overall, if you keep in mind the above facts, it will definitely help you make an informed decision whether you should use payday loan services or look out for better alternatives.


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